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Conflict about currency consequences

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Bank of Japan governor Kuroda has indicated he would be unhappy with further yen weakness. Yen weakness to date has boosted exporters' profits but not export volumes (Japan has lost market share in the US). Yen weakness does damage via higher commodity import prices, of course.
  • Reserve Bank of Australia governor Stevens seems to be having a different internal debate, and was out overnight trying to talk down the level of his currency with additional hints of monetary easing. The impact of the last rate cut on consumer sentiment seems to have faded quite quickly.
  • French industrial production data is due, and in spite of a manufacturing PMI that seems permanently stuck in contraction territory the numbers are expected to continue to expand. Domestic demand in France and elsewhere has been one of the Euro area positive surprises.
  • Greek inflation is expected to show deflation. Greece is the only country in the Euro area with genuine deflation (a general decline in prices). Greece is the only country in the Euro area that has not benefitted from quantitative policy. Welcome to Euro area economic logic.